organizational behavior and organizational change ...rnn0/bio/emba/emba06.pdf · organizational...

CSE & Enterprise Systems CenterLehigh University

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Roger N. Nagel © 2006

Organizational Behavior andOrganizational Change

Organizational Structure

Roger N. NagelSenior Fellow & Wagner Professor

Lehigh University


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Topics This PresentationWhat Is Organizational Structure?Common Organization Designs

“Organizational behavior”Eleventh Edition

By Steve RobbinsISBN 0-13-191435-9

Reference Book

“Organizational behavior”Eleventh Edition

By Steve RobbinsISBN 0-13-191435-9

Reference Book

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o r g a n i z a t i o n a l b e h a v i o ro r g a n i z a t i o n a l b e h a v i o r

stephen p. robbins

e l e v e n t h e d i t i o ne l e v e n t h e d i t i o n


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What Is Organizational Structure?

Key Elements:

• Work specialization

• Departmentalization

• Chain of command

• Span of control

• Centralization and decentralization

• Formalization

Key Elements:

• Work specialization

• Departmentalization

• Chain of command

• Span of control

• Centralization and decentralization

• Formalization

Organizational Structure

How job tasks are formally divided, grouped, and coordinated.

Page 452Page 452


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Key Design Questions and Answers for Designing the Proper Organization Structure

E X H I B I T 15–1 53

E X H I B I T 15–1 Page 453

The Key Question The Answer Is Provided By

1. To what degree are articles Work specializationsubdivided into separate jobs?

2. On what basis will jobs be grouped Departmentalizationtogether?

3. To whom do individuals and groups Chain of commandreport?


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Key Design Questions and Answers for Designing the Proper Organization Structure



The Key Question The Answer Is Provided By

4. How many individuals can a manager Span of controlefficiently and effectively direct?

5. Where does decision-making Centralizationauthority lie? and decentralization

6. To what degree will there be rules Formalizationand regulations to direct employeesand managers?


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Grouping Activities By:

• Function

• Product

• Geography

• Process

• Customer

Grouping Activities By:

• Function

• Product

• Geography

• Process

• Customer

Departmentalization

The basis by which jobs are grouped together.


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Chain of CommandThe unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.

AuthorityThe rights inherent in a managerial position to give orders and to expect the orders to be obeyed.

Unity of CommandA subordinate should have only one superior to whom he or she is directly responsible.


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Narrow Span Drawbacks:• Expense of additional layers of management.• Increased complexity of vertical communication.• Encouragement of overly tight supervision and

discouragement of employee autonomy.

Narrow Span Drawbacks:• Expense of additional layers of management.• Increased complexity of vertical communication.• Encouragement of overly tight supervision and

discouragement of employee autonomy.

Concept:Wider spans of management increase organizational efficiency.

Concept:Concept:Wider spans of management increase organizational Wider spans of management increase organizational efficiency.efficiency.

Span of ControlThe number of subordinates a manager can efficiently and effectively direct.


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Contrasting Spans of Control

E X H I B I T 15–3 page 457

E X H I B I T 15–3 page 457


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What Is Organizational Structure? CentralizationThe degree to which decision making is concentrated at a single point in the organization.

FormalizationThe degree to which jobs within the organization are standardized.

DecentralizationThe degree to which decision making is spread throughout the organization.


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Source: S. Adams, Dogbert’s Big Book of Business, DILBERT E X H I B I T 15–4 Page 459



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Common Organization Designs

A Simple Structure:Jack Gold’s Men’s Store

A Simple Structure:Jack Gold’s Men’s Store

Simple Structure

A structure characterized by a low degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.




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Common Organization DesignsBureaucracy

A structure of highly operating routine tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command.


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The Bureaucracy

StrengthsFunctional economies of scaleMinimum duplication of personnel and equipmentEnhanced communicationCentralized decision making

WeaknessesSubunit conflicts with organizational goalsObsessive concern with rules and regulationsLack of employee discretion to deal with problems


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Common Organization Designs

Key Elements:+ Gains the advantages of functional and product

departmentalization while avoiding their weaknesses.

+ Facilitates coordination of complex and interdependent activities.

– Breaks down unity-of-command concept.

Key Elements:+ Gains the advantages of functional and product

departmentalization while avoiding their weaknesses.

+ Facilitates coordination of complex and interdependent activities.

– Breaks down unity-of-command concept.

Matrix Structure

A structure that creates dual lines of authority and combines functional and product departmentalization.


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Matrix Structure (College of Business Administration)

(Dean)

(Director)

Employee

E X H I B I T 15–6E X H I B I T 15–6


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New Design Options

Characteristics:• Breaks down departmental barriers.• Decentralizes decision making to the team level.• Requires employees to be generalists as well as

specialists.• Creates a “flexible bureaucracy.”

Characteristics:• Breaks down departmental barriers.• Decentralizes decision making to the team level.• Requires employees to be generalists as well as

specialists.• Creates a “flexible bureaucracy.”

Team Structure

The use of teams as the central device to coordinate work activities.


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New Design Options

Concepts:Advantage: Provides maximum flexibility while concentrating on what the organization does best.

Disadvantage: Reduced control over key parts of the business.

Concepts:Advantage: Provides maximum flexibility while concentrating on what the organization does best.

Disadvantage: Reduced control over key parts of the business.

Virtual Organization

A small, core organization that outsources its major business functions.

Highly centralized with little or no departmentalization.


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First

E-procurement•Access•Transaction

Second

Logistics•Transaction•Digitization

Third

E-Business•Digitization•Virtual ORG

Fourth SCM & ERP•Virtual ORG•Collaborate NW

Then

Co development•Collaborate NW•Innovation NW

Diagram Source General ElectricThe Intelligent Supply Chain


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Common Goals Partner Collaboration Innovation

This is achieved through the integration of information with the people, cultural and organizational issues that could otherwise prevent the network from being smart.

The transition from one level to the next requires a major paradigm shift that should not be taken for granted.


Collaboration Network

Innovation Network

Phase Transition

Phase Transition

Source Cisco


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A dynamic set of companiesThat come together for a time based and opportunity driven goalRelationships vary from formal to informal,They need to practice working together to learn to communicate, share information, and IP etc.Moderate interaction

Limited scope of activities Limited collaborationMany fail over trust issues



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Provide value in many ways:

Global convenience –One WorldStandards – Rosetta NetVirtual resources – Pabst

Finding compatible partners –Solid works Manufacturing Network

Franchise (Node) Charisma –Ritz Carlton



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A set of companies who share a short and long term roadmap or vision and focus significant resources on value producing Intensive interaction

Committed and involved in the goals and success of all collaboratorsExtensive Information Sharing Integrated Infrastructure facilitates both people and information networking

CollaborationNetwork

Product Vs. Product

Supply Chain Vs. Supply Chain

Process Vs. Process


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Can redefine an Can redefine an industryindustry and provide value in many ways:

Distributed location & authority - CNNSwarm effect –VISA Network & Node Charisma -



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Level Value Proposition Enabled Simple Example



Innovation Network

Rosetta NetOne WorldHoliday Inn, Hertz

DuPontCiscoVisa, Master Card

Li & FongAgile Web of PAAcheron’s Call

StandardsGlobal Alliance Franchise

Collaboration HubNode & Network CharismaSwarm Effect

Network EconomyDynamic TeamsVirtual Reality

Act smart in terms of how the individual members coordinate, collaborate, innovate and organize themselves


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A Virtual Organization

E X H I B I T 15–7E X H I B I T 15–7


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New Design Options

T-form Concepts:Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.

Breakdown external barriers to customers and suppliers.

T-form Concepts:Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries.

Breakdown external barriers to customers and suppliers.

Boundaryless Organization

An organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.


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Why Do Structures Differ?Mechanistic Model

A structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization.


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Why Do Structures Differ?Organic Model

A structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.


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Mechanistic Versus Organic Models

E X H I B I T 15–8E X H I B I T 15–8


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Why Do Structures Differ? – StrategyInnovation StrategyA strategy that emphasizes the introduction of major new products and services.

Imitation StrategyA strategy that seeks to move into new products or new markets only after their viability has already been proven.

Cost-minimization StrategyA strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting.


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The Strategy-Structure Relationship

E X H I B I T 15–9E X H I B I T 15–9

Strategy Structural Option

Innovation Organic: A loose structure; low specialization, low formalization, decentralized

Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization

Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings


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Why Do Structures Differ? – Size

Characteristics of large organizations:• More specialization• More vertical levels• More rules and regulations

Characteristics of large organizations:• More specialization• More vertical levels• More rules and regulations

Size

How the size of an organization affects its structure. As an organization grows larger, it becomes more mechanistic.


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Why Do Structures Differ? – Technology

Characteristics of routineness (standardized or customized) in activities:

• Routine technologies are associated with tall, departmentalized structures and formalization in organizations.

• Routine technologies lead to centralization when formalization is low.

• Nonroutine technologies are associated with delegated decision authority.

Characteristics of routineness (standardized or customized) in activities:

• Routine technologies are associated with tall, departmentalized structures and formalization in organizations.

• Routine technologies lead to centralization when formalization is low.

• Nonroutine technologies are associated with delegated decision authority.

Technology

How an organization transfers its inputs into outputs.


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Why Do Structures Differ? – Environment

Key Dimensions-• Capacity: the degree to which an environment can

support growth.

• Volatility: the degree of instability in the environment.

• Complexity: the degree of heterogeneity and concentration among environmental elements.

Key Dimensions-• Capacity: the degree to which an environment can

support growth.

• Volatility: the degree of instability in the environment.

• Complexity: the degree of heterogeneity and concentration among environmental elements.

Environment

Institutions or forces outside the organization that potentially affect the organization’s performance.


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The Three Dimensional Model of the Environment

Complexity

Volatility

Capacity

E X H I B I T 15–10E X H I B I T 15–10


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“Bureaucracy Is Dead”

Characteristics of Bureaucracies

SpecializationFormalizationDepartmentalizationCentralizationNarrow spans of controlAdherence to a chain of command.

Why Bureaucracy SurvivesLarge size prevails.Environmental turbulence can be largely managed.Standardization achieved through hiring people who have undergone extensive educational training.Technology maintains control.


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Organizational Designs and Employee Behavior

Research Findings:

• Work specialization contributes to higher employee productivity, but it reduces job satisfaction.

• The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.

• The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.

• Participative decision making in decentralized organizations is positively related to job satisfaction.

Research Findings:

• Work specialization contributes to higher employee productivity, but it reduces job satisfaction.

• The benefits of specialization have decreased rapidly as employees seek more intrinsically rewarding jobs.

• The effect of span of control on employee performance is contingent upon individual differences and abilities, task structures, and other organizational factors.

• Participative decision making in decentralized organizations is positively related to job satisfaction.


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Organization Structure: Its Determinants and Outcomes

Implicit Models of Organizational StructurePerceptions that people hold regarding structural variables formed by observing things around them in an unscientific fashion.

E X H I B I T 15–11E X H I B I T 15–11


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XIE XIERoger N. Nagel

Wagner Professor and Senior Fellow CSE Department &

The Enterprise Systems Center at Lehigh University 200 West Packer Avenue

Bethlehem, Pennsylvania, 18015(610) 758-4086, (610) 868-0402 [fax]

[email protected]

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